Twisted gastrulation (Twsg1) is a key extracellular regulator of bone morphogenetic protein (BMP) signaling. BMPs are potent inducers of bone formation and any dysregulation of BMP signaling can lead to defects in bone remodeling. To examine whether Twsg1 regulates bone remodeling, we generated a Twsg1-null mouse that showed profound osteopenia with significantly reduced histomorphometric parameters compared to wild type (WT) mice. Tetracycline labeling studies showed no significant decrease in mineral apposition rate in Twsg1-null mice compared to WT mice, indicating that osteopenia in Twsg1-/- mice are not due to reduced osteoblast function. On the other hand, Twsg1-/- mice showed increased bone resorption compared to WT mice characterized by larger and increased numbers of osteoclasts, increase in the area of resorption pits and increased serum CTX and TRAP levels. Enhanced osteoclastogenesis in vitro was associated with an increase in cell fusion and upregulation of key genes involved in osteoclast differentiation (NFATc1) and cell- cell fusion (DC-STAMP). We also show higher levels of phosphorylated Smad1/5/8 in Twsg1-/- osteoclasts and that the enhanced in vitro osteoclastogenesis can be reversed by increasing doses of Noggin, a BMP- specific antagonist. Further, we show that exogenous BMP2 increases pSmad1/5/8 levels in WT osteoclasts and also enhances RANKL stimulated osteoclast differentiation. These results provide compelling evidence for our hypothesis that Twsg1 inhibits osteoclast formation and function through regulation of BMP signaling. Thus in specific aim 1, we will determine if osteoclast precursors rather than stromal cell/osteoblasts are direct targets of Twsg1-/- disruption using (1A) reciprocal co-culture experiments with osteoblasts and osteoclast precursors from both WT and Twsg1-/- mice, and (1B) chimeric mice in which either WT or Twsg1-/- marrow will be transplanted into lethally irradiated Twsg1-/- or WT mice. In specific aim 2, we will evaluate whether enhanced osteoclastogenesis in Twsg1-/- mice is mediated through increased BMP signaling and elaborate the function of Twsg1 and BMP in osteoclastogenesis by (2A) determining if increased BMP signaling mediates the osteoclast phenotype in Twsg1-/- mice, and determine if BMPs can regulate RANKL stimulated osteoclastogenesis, and (2B) determining the function of Twsg1 as an inhibitor of osteoclastogenesis. In specific aim 3, we will elucidate molecular and cellular mechanisms mediating increased osteoclastogenesis in Twsg1-/- mice by (3A) recapitulating the osteoclast phenotype of Twsg1-/- mice using better defined osteoclast progenitor population from the bone marrow, and determining if osteoclast precursors are already primed to RANKL and/or M-CSF, (3B) determining whether Twsg1 disruption leads to altered RANK-mediated signaling pathways; and (3C) evaluating if NFAT-c1 is a target of Twsg1-deficiency . Completion of these aims will enable us to unequivocally determine the roles of Twsg1 in osteoclastogenesis and bone resorption. The impact of our work may not only provide an understanding of the mechanisms by which Twsg1 inhibit osteoclastogenesis but also first steps towards development of novel antiresorptive drugs that can be used in the treatment of osteoporosis and osteolytic bone tumors.